MORTGAGES: solicitors who become unwittingly involved in scams face criminal sanctions


Mortgage fraudsters are employing increasingly sophisticated scams that could land unwary solicitors in jail, lawyers were warned this week.



The Law Society has published a practice note warning that most scammers ensure one professional - often a solicitor - is at the core of a fraud to lend transactions legitimacy.



The document underlines that solicitors who become embroiled in a scam, even unwittingly, could face criminal sanctions because of the extension of the definition of fraud in the Fraud Act 2006 and the anti-money laundering regime in the UK.



Common scams involve buying and selling properties between groups of onshore or offshore companies, before approaching a lender for a mortgage at a vastly inflated value. The first mortgage is often not registered against the property and not redeemed on completion of the next sale.



Other scams involve a fictitious second purchaser, who is either using a false identity or might be someone vulnerable to pressure from fraudsters, and taking out loans for significantly more than the property is worth.



The document emphasises that large-scale frauds usually involve several properties and that the buy-to-let market - particularly transactions involving new-build complexes or big renovation projects - are especially vulnerable.



Solicitors are advised to question why a distant client has not instructed a local solicitor, why a client wants to sell quickly, why they have a short credit history for their age, or why someone other than the client has paid the deposit.



The Law Society has also urged the government to review the reporting obligations of solicitors under the Proceeds of Crime Act (POCA) 2002, in response to a Home Office consultation which closed this week.



Robin Booth, chairman of the Law Society's money laundering taskforce, said: 'Lawyers have concerns that the reporting and consent regime generate an enormous amount of work and in most cases produce reports and applications for consent that are technical and of no value.'



He added that the Society had recommended a 'thorough review' of the reporting regime.



A Home Office spokeswoman said it had not indicated a preferred option and remained open-minded about reform proposals.



- See www.lawsociety.org.uk/mortgagefraud



Anita Rice